Trump’s goal of extending the 2017 tax cuts could have major implications for healthcare
In Monday’s blog, I told you that the incoming Trump administration will be dominated by budget matters in 2025, with an effort to find enough savings to extend the 2017 tax cuts. The proposed Department of Government Efficiency (DOGE) commission seems dedicated to a fundamental remake of government, programs, and regulations. While the Republican or GOP control of both Houses is tight, leaders and the rank-and-file seem ready to hitch their wagons to Trump and his agenda. But as I noted Monday, process and procedures could create challenges.
With all this in mind, what might healthcare cut proposals look like?
The DOGE, Trump, and congressional GOP lists will likely be culled from various sources including governmental authorities and outside conservative think tanks. The lists below include proposals from the Congressional Budget Office (CBO) and a number of other changes not on the recent CBO list. Not all are likely reductions, but I include them here to represent a greater number of possible cost-cutting scenarios.
Remember that on the campaign trail, the president-elect seemingly took cuts to Social Security and Medicare off the table – although a definition of a “cut” is nebulous. As an example, are provider or health plan rate cuts or related reimbursement reforms true cuts in lawmakers’ eyes? Or is this limited to direct impact on a beneficiary?
Before we get to the details, I would also note that you should not assume Medicare Advantage (MA) will not be impacted just because of Trump’s declaration on safeguarding Medicare and his perceived friendliness toward MA. The tax cuts likely mean savings will be taken from MA. What’s more, there is a growing alliance between congressional Democrats and so-called anti-corporate-welfare Republicans that will help drive Trump toward MA reforms as well. Further, prominent conservative think tanks have also called for MA reform and accountability. In the end, MA won’t be safe given the drive for savings and numerous groups singling out MA for reductions?
CBO list
The CBO recently came out with its new deficit reduction options. Here are some of its major healthcare reduction options.
Medicaid:
- Establish caps on federal spending for Medicaid – This would either establish (1) overall spending caps or (2) establish per-enrollee caps. In essence, these would amount to either a block grant or a per-capita cap proposal.
- Reduce federal Medicaid matching rates – These changes could include (1) capping administrative reimbursement at 50%; (2) removing the floor of a 50% match for medical services; and (3) moving the higher expansion population match to regular matching rates.
- Limit state taxes on healthcare providers – This would rein in what many believe is the abuse of the use of provider taxes to generate federal Medicaid matching funds by states.
Medicare:
- Change the cost-sharing rules for Medicare and restrict Medigap insurance – These changes would (1) restructure deductibles and cost-sharing in traditional Medicare and establish an annual out-of-pocket maximum and (2) restrict the generosity of existing and new Medigap policies.
- Reduce MA benchmarks — This change would reduce benchmarks in the MA program by 10 percent, beginning in January 2027.
- Modify payments to MA plans for health risk – These changes would (1) increase the negative coding intensity adjustment from negative 5.9% to at least negative 8%; (2) increase the negative coding intensity adjustment to 20%; and (3) eliminate the use of Health Risk Assessments (HRAs) in risk adjustment and use two years’ worth of data for risk score calculation.
- Reduce payments for hospital outpatient departments – These changes are various forms of implementing site neutral payments. These changes would (1) apply site neutral payments at both off-campus and on-campus hospital outpatient departments for services that are commonly supplied in physicians’ offices; (2) apply site neutral payments to all hospital outpatient departments for drug administration; and (3) apply site neutral payments to all hospital outpatient departments for imaging.
- Consolidate and reduce Medicare payments for Graduate Medical Education (GME) at teaching hospitals – This change would consolidate all Medicare payments for GME into a grant program for teaching hospitals.
- Reduce Medicare’s coverage of bad debt – The changes either eliminate recognition of bad debt or reduce the allowable bad debt that Medicare reimburses to participating facilities.
- Reduce payments for drugs delivered by 340B hospitals – This change uses a few methods to reduce overall payments.
- Increase the premiums paid for Medicare Part B — This change would increase the basic Part B premium to cover 35% of expected costs for Part B benefits over time rather than 25%.
Federal Employees’ Health Benefits Program (FEHBP) and Related Programs/Military TRICARE Coverage:
- Adopt a voucher plan and slow the growth of federal contributions for the FEHBP – This change would cap the amount of funding growth from the federal government each year using the consumer price index (CPI).
- Introduce enrollment fees in the “TRICARE for Life (TFL)” Medicare wrap – This change would require most Medicare-eligible beneficiaries who choose to enroll in TFL to pay an annual enrollment fee.
- Introduce minimum out-of-pocket cost requirements in TRICARE for Life – This change would introduce minimum out-of-pocket requirements for TFL beneficiaries. This is not a maximum-out-of-pocket cost proposal.
Other notable proposals:
Below I outline other possible reforms beyond what the CBO has addressed above (or I add to what CBO proposes). These are collected from recommendations of various public and private healthcare policy entities and my own ideas. Some of them are investments that lead to longer-term savings.
General Healthcare Reform/Commercial/Employer Groups:
- Begin migrating away from employer coverage to individual coverage
- Direct assistance for healthcare insurance purchases and Health Savings Accounts (HSA) expansion
- Partial or full removal of employer health insurance tax deductibility in the corporate and individual tax code
- True investments in affordable, universal access
- Medical service price reform, including national or regional price-setting across lines of business and conversion to value-based care (VBC) payments
- Drug price reform for retail and medical, including:
- National or regional negotiations and price-setting across lines of business
- Reimbursement reform and conversion to VBC payments
- Patent reform
- Distribution channel reform and transparency
- Rebate reform and pass-through of lowest net price at the point of sale
- Advertising and marketing reform
- Drug importation
- Reference pricing throughout the healthcare system
- Remove restrictions on physician owned facilities
- Fraud, waste, and abuse (FWA) investments across all lines of business
- Major Pharmacy Benefits Manager (PBM) reforms, especially payment and contracting
- Extend negotiated drug prices in Medicare to commercial
- Direct negotiation via trade with drug makers
- Reform the No Surprises Act (NSA) as arbitrations favor providers and are driving prices up
- Investments in primary care, health, wellness, care management, population health, and chronic disease management and education
- Expanded price transparency and enforcement
- Interoperability investments
- Long-term care investments and an “Aging-of-America” plan, including creation of a robust long-term care insurance market and a public-private continuum of care
- Personal responsibility focus in all lines of business
- Emphasize the right site of care
- Focus on aberrant physician and other provider patterns
Medicaid:
- Stricter qualification and requalification requirements
- Work requirements for certain populations
- Waiver of benefit requirements for certain populations
- Driving value-based care and payments
- Remove uncompensated care payments
- Personal responsibility incentives and penalties
- Allow Medicaid prorgam dollars to be used for employer-based coverage
- Limits on long-term care
- More state innovation
- Expansion of the drug rebate program and inflation rebates
Medicare:
- Full voucher program with set inflationary increases regardless of enrollment in MA or traditional fee-for-service (FFS)
- Traditional program reforms, including:
- Inpatient-only service list elimination
- Full or partial site neutral payment adoption
- Remove uncompensated care payments in Medicare and Medicaid
- Establish Unified Post-Acute Care Payment System
- Expand yet simplify value-based payments
- Further dual eligible program integration, streamlining, and coordination – both in MA and traditional program
- MA rate reform, including:
- Reduction of benchmarks across all counties
- Reductions of benchmarks to no more than 100% of FFS in each county
- Blending of benchmarks between county and national costs
- Competitive bidding and divorcing rate-setting from the traditional program
- MA risk adjustment reform, including:
- Elimination of both manual chart reviews and health risk assessments
- Risk Adjustment Data Validation (RADV) enhancement and increased penalties
- Stricter risk models
- MA Star program reforms, including budget neutral funding
- Part D changes, including:
- Possible acceleration and expansion of Medicare drug price negotiations to add international reference pricing
- Expansion of inflation rebates
- Contraction of the Inflation Reduction Act’s (IRA) Part D cost-sharing reductions and limits
Affordable Care Act (ACA)/Exchanges:
- Repeal of the Affordable Care Act (ACA) and converting to state grants for the uninsured (could be pared with Medicaid block grants)
- Sunset enhanced premium Exchange subsidies
- Reform ACA subsidies for both premiums and cost-sharing
- Restructure Exchange premium subsidies to remove repayment limits and further rein in subsidy abuse
- Reduce mandated benefits and mandates in Exchanges
- Separate the subsidized and unsubsidized ACA marketplace
CBO options: https://www.cbo.gov/system/files/2024-12/60557-budget-options.pdf
#2025 #election2024 #congress #trump #healthcare #healthcarereform
— Marc S. Ryan
